Activist Glossary

13D:

A form filed with the SEC when a person or group acquires more than 5% of any voting class of a company's shares and has an active intention. The 13D must be disclosed within 10 calendar days of the shareholder passing the 5% threshold. In the 13D filing, the shareholder is required to disclose its ownership, intent, cost and transactions in the past 60 days.

13G:

A form filed with the SEC when a person or group acquires more than 5% of any voting class of a company’s shares and intends on being a passive shareholder. If an investor files a Schedule 13G and later decides to become more active in the company, he must then file a 13D.

13F:

A quarterly form filed with the SEC which is required of institutional investment managers with over $100 million of qualifying assets. The 13F discloses the investment managers long holdings as of the end of each quarter and is filed 45 days after quarter end.

Activist Investor:

An individual or group that purchases a significant amount of a public company's voting shares with the goal of effecting change within the company.

Board of Directors:

The appointed or elected body of individuals that oversee the activities of the company, but also holds a fiduciary duty to act in the best interest of the company’s shareholders.

Corporate Governance:

The system of rules, practices and processes by which a company is directed and controlled.

Item 4:

The section of the 13D which details the investors “Purpose of Transaction” or activist intent. This is where any letters, white papers, press releases, etc. are disclosed.

Proxy Contest/Proxy Fight:

The occasion where a stockholder (or group) runs a campaign in opposition to the company’s agenda or submits an independent proposal not supported by the company.

Poison Pill:

Also called a “Shareholder Rights Plan”, a defensive strategy designed to discourage hostile takeovers and keep shareholders below a certain percentage of ownership. If a shareholder exceeds the threshold of a poison pill (usually between 10% and 20%), all other shareholders have the right to acquire additional stock of the company for a nominal amount, effectively diluting the interest of the hostile suitor.

Proxy Vote:

A ballot cast by one shareholder on behalf of another. One of the benefits of being a shareholder is the right to vote on certain corporate matters.

Shareholder Activism:

An active approach to investing in public companies where shareholders exercise their right as owners in order to influence companies.

Staggered Board:

When every member of the Board is not up for election in the same year (i.e. there is a nine-person Board divided into three classes, with each class serving three year terms). Staggered boards helps reduce the risk of a takeover since it would take longer for the shareholder to gain control of a board, but can also be considered an entrenchment tool.

Standstill Agreement:

An agreement often entered into between an activist and a company in which, in exchange for receiving something (usually board seats), the activist will agree to certain restrictions for a specified period.

Standstill Provisions:

Restrictions and obligations the activist may be bound by (not to start a proxy fight beyond the current term, to cap. its ownership and to vote with the board).